- GBP/USD quickly reversed an intraday dip to two-week lows amid some USD selling.
- Concerns about a no-deal Brexit might keep a lid on any runaway rally for the sterling.
- Monday’s focus will be on the high-level EU-UK meeting amid absent economic data.
The GBP/USD pair managed to rebound over 90 pips from two-week lows and was last seen trading near session tops, just below mid-1.2500s.
The pair attracted some dip-buying near the 1.2455 region and for now, seems to have stalled its recent pullback from the three-month high set last Wednesday. The sharp intraday bounce lacked any obvious catalyst and was solely led by some intraday US dollar selling.
Fears about the second wave of the coronavirus outbreak led to a fresh wave of the global risk-aversion trade and triggered a fresh leg down in the US Treasury bond yields on Monday. This, in turn, was seen as a key factor that undermined the USD demand.
However, increasing risk of a no-deal Brexit might continue to take its toll on the British pound and cap any strong gains for the GBP/USD pair. Hence, Monday’s key focus will remain on the high-level meeting between the UK and EU leaders, scheduled at 12:30 GMT.
The incoming Brexit-related headlines should play a key role in influencing the sentiment surrounding the sterling. This along with the broader market risk sentiment might produce some meaningful trading opportunities amid absent relevant market moving economic releases.
Hence, it will be prudent to wait for some strong follow-through buying before traders start positioning for the resumption of the GBP/USD pair’s prior bullish trend.
From a technical perspective, the GBP/USD pair managed to find decent support near the 50% Fibonacci level of the 1.2076-1.2788 positive move. The mentioned level, around mid-1.2400s, should now act as a key pivotal point for short-term traders.
Technical levels to watch
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